By Nadim Chaudhry, CEO of Green Power Conferences
Representatives from up and down the value chain of the biofuels industry took stage this week at World Biofuels Markets to discuss issues regarding the state of the industry and several key issues impacting its growth.
Having been involved in this space since 2003, I’ve seen a series of phases. The first – what I’ll call Euphoria – was in the 2006-2008 timeframe, where a series of events, from high oil prices to feedstock surplus (and consequent low cost) and mostly supportive government policy around the world. Biofuels were “in.”
This quickly gave way to the Dark Ages, the period from 2008 until about midway through 2011. Crashing oil prices, soaring feedstock costs, controversial claims about food vs. fuel, Indirect Land Use, “Splash & Dash”, and expired tax credits all combined to hammer the industry.
I believe we have entered a new phase. It’s too early to tell if this is a Renaissance, but there are a number of indicators that we’ve turned a corner. Volumes are back up in the first generation sectors – with global production of ethanol and biodiesel at an all time high for 2012.
We are in the midst of a promising set of second generation feedstocks, from waste materials like garbage, flue gas and forest materials to non-food crops like camelina and jatropa, to non terrestrial crops like micro and macro algae (seaweed). In addition to these feedstocks, processing technology has evolved to create drop-in replacement fuels.
As Kaisa Hietala, Vice President of Market Development for Neste Oil said, “The hype seems to be over – existing production technologies and end product quality have been tested successfully, raw material availability is a long term question – how to go forward?”
John Plaza, founder and CEO of Imperium Renewables believes that the aviation industry is a billion gallon per year market by 2020, one that can be accelerated by a combination of events.
“Significant use by the Department of Defense, securing approval of biojet fuel under the US Renewable Fuel Standard, and monetizing the CO2 reductions in the EU by use of biojet fuel would be key drivers,” said Plaza.
This is an issue not only for the aviation industry, but also for the automotive industry, which has increased production of more fuel-efficient vehicles as well as advanced technology vehicles that run on biofuels and electricity. According to Candace Wheeler, a Technical Fellow at General Motors, pairing already efficient vehicles with biofuels magnifies the environmental impact. The question for her is, moving forward, how to make the right choice for biofuels. Cost and collaboration is the answer.
“We need to see many of these newer advanced fuel technologies walk down their cost curves,” said Wheeler. “The solution will require automakers, oil companies, and regulators all working together.”
Gone but not forgotten are the concerns about the sustainability of biofuels. While many new studies have emerged to repudiate early claims about the negative impact of first generation biofuels on land use, emissions and food prices, the process of addressing those concerns has paid dividends.
It triggered a much larger debate on how we, as a society, balance the various roles that our limited land and resources must play going forward. We need to find a way to sustainably use land and water to meet multiple needs – from food, to energy to other environmental services.
“I hope we will finally start to discuss the intelligent design of biofuel systems,” said Bruce Dale, professor at the U.S. Department of Energy’s Great Lakes Bioenergy Research Center at Michigan State University. “That is a much more satisfying activity than our current endless debates about indirect land use (iLUC) estimates for biofuels.”
Indeed, developers of next generation bioenergy crops and bioenergy facilities are taking heed, creating projects that leverage local climate, agriculture and resources to create fuels that can be produced and consumed locally. Increasingly, biorefineries are becoming integrated, creating a stream of industrial products like chemicals in addition to fuels.
Another trend we can watch in 2012 is the importance of strategic partnerships in getting early stage technologies across the “valley of death” – or the gap between lab/pilot scale and full commercialisation.
David Berry, a Principal at Flagship Ventures, notes that despite some early successes with IPOs among biofuels companies, the current significant backlog has forced companies “to re-evaluate what it takes for a good IPO and have encouraged investors to think more thoughtfully about what really makes a company IPO-ready.”
He believes corporate partners can play a significant role for facilities development.
In addition to strategic partners, financing from development banks and hedge funds can also be a source of funding, accordingly to Plinio Nastari, President of Datagro, a consulting firm for the ethanol and sugar industries.
While we may not want to call it a Renaissance just yet, it does seem clear that the industry is putting some distance between the challenges of the past few years. How far it will go, and how fast, is something we’ll revisit at next year’s World Biofuels Markets.
Nadim Chaudhry is the Founder and CEO of Green Power Conferences, the market leader in renewable energy conferences. He is passionate about sustainability and founded GPC in 2003 with a mission to help connect businesses, investors and policy makers to commercialise renewable energy technologies.